Brexit with Little Impact on Business Investment

Encompassing intellectual property (including transport and machinery, and software), residential property, and commercial property, business investment in the UK has surprised economists and remained stable in spite of Brexit.

The macroeconomic picture after Brexit can’t be assessed yet, with only three quarters of data to analyse since June 2016. Recent data from on the UK GDP, however, was published on 25 May showing no marked slowdown since Brexit.

Investment Spending after Brexit

Economists expected business investment to be one of the first parts of the economy to see a negative impact after Brexit, but the ONS (Office for National Statistics) reported a rise of 0.5% in total investment spending in 2016. In the first quarter of 2017, business investment grew 0.8% in real assets utilised in production.

Investment spending composes approximately 17% of the UK’s national income. Business investment is more than half of this value, and the rest is composed of government investment and residential property.

Borrowing Costs

Member of the interest rate setting committee of the Bank of England, Kristin Forbes, stated last year that borrowing costs are what impacts the economy more. If they go up, they will have an impact on the economy. Borrowing costs, however, have stayed low since both the EU referendum and the interest rate cut, which was from 0.5% to 0.25%.

While bigger companies seem to be hesitating to make a move, business must go on and spending capital is always needed for the functioning of an economy.

Possible Future of Business Investment

The flow of cash, say international investors, will greatly depend on Britain retaining strong trading links with the EU and continuing to be an open nation. Building relationships with other countries and investing in both skills and infrastructure will also be a positive factor.

In the last year, Britain attracted 1,144 FDI funded projects, which created 44,665 jobs in Britain. On an EY survey, 32% of global investors stated that they wanted the UK to strike new trade deals with countries like India, the US, and China.

31% said they wanted Britain to invest more on infrastructure, 28% want the trade arrangements with the EU to be retained, and further 28% want skills to be a focus. A clear strategy will help the UK in defining its position and protect it for future opportunities in investment.

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